U.S. trade deficit just hit a 10-year high due to record shortfall with China

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March 6, 2019, 5:12 PM GMT / Source: Reuters

By Reuters

The U.S. trade deficit surged to a 10-year high in 2018, with the politically sensitive shortfall with China hitting a record peak, despite the Trump administration slapping tariffs on a range of imported goods in an effort to shrink the gap.

The Commerce Department said on Wednesday that an 18.8 percent jump in the trade deficit in December had contributed to the $621 billion shortfall last year. The 2018 deficit was the largest since 2008 and followed a $552.3 billion gap in 2017.

The trade deficit has deteriorated despite the White House’s protectionist trade policy, which President Donald Trump said is needed to shield U.S. manufacturers from what he says is unfair foreign competition.

The United States last year imposed tariffs on $250 billion worth of goods imported from China, with Beijing hitting back with duties on $110 billion worth of American products, including soybeans and other commodities. Trump has delayed tariffs on $200 billion worth of Chinese imports as negotiations to resolve the eight-month trade war continue.

The United States has also slapped duties on imported steel, aluminum, solar panels and washing machines. The goods trade deficit with China increased 11.6 percent to an all-time high of $419.2 billion in 2018. The United States had record imports from 60 countries in 2018, led by China, Mexico and Germany. Imports of good hit a record $2.6 trillion last year.

The December trade deficit of $59.8 billion was the largest since October 2008 and overshot economists’ expectations for a $57.9 billion shortfall, as exports fell for a third straight month and imports rebounded.

The release of the December report was delayed by a 35-day partial shutdown of the government that ended on Jan. 25.

When adjusted for inflation, the goods trade deficit surged $10 billion to a record $91.6 billion in December. The jump in the so-called real goods trade deficit suggests that trade was probably a bigger drag on fourth-quarter gross domestic product than initially estimated by the government.

Other data on Wednesday suggested some slowing in the labor market, though the pace of job gains remains more than enough to drive the unemployment rate down. The ADP National Employment Report showed private payrolls increased by 183,000 in February after surging 300,000 in January. The ADP report, which is jointly developed with Moody’s Analytics, was published ahead of the government’s more comprehensive employment report for February scheduled for release on Friday.